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Markups, Labor Market Inequality and the Nature of Work

Greg Kaplan and Piotr Żoch

No 2020-09, Working Papers from Becker Friedman Institute for Research In Economics

Abstract: We demonstrate the importance of distinguishing between the traditional use of labor for production, versus alternative uses of labor for overhead, marketing and other expansionary activities, for studying the distribution of both factor income and labor income. We use our framework to assess the impact of changes in markups on the overall labor share and on labor income inequality across occupations. We identify the production and expansionary content of different occupations from the co-movement of occupational income shares with markup-induced changes in the labor share. We find that around one-fifth of US labor income compensates expansionary activities, and that occupations with larger expansionary content have experienced the fastest wage and employment growth since 1980. Our framework can rationalize a counter-cyclical labor share in the presence of sticky prices and can be used to study the distributional effects of demand shocks, monetary policy and secular changes in competition.

Keywords: Markups; inequality; labor share; income distribution; occupations; monetary policy; overhead (search for similar items in EconPapers)
JEL-codes: D2 D3 D4 E3 E5 J2 L1 (search for similar items in EconPapers)
Pages: 80 pages
Date: 2020
New Economics Papers: this item is included in nep-lma and nep-mac
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Citations: View citations in EconPapers (16)

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Related works:
Working Paper: Markups, labor market inequality and the nature of work (2022) Downloads
Working Paper: Markups, Labor Market Inequality and the Nature of Work (2020) Downloads
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